A research group involving a Cardiff University professor and a former Welsh Government minister has concluded that the not-for-profit, bond-financed model used by Dŵr Cymru/Welsh Water is not meeting customer needs.
Professor Kevin Morgan and former Labour economy minister Andrew Davies are members of Foundational Economy Research, which has published a briefing examining the Welsh and English water sectors.
The briefing assesses the business models of Dŵr Cymru and privatised Thames Water, finding both inadequate.
Since its creation in 2001, Dŵr Cymru has supplied drinking water and sewage treatment across most of Wales.
Its ownership and funding arrangements differ from those of English water companies, whether publicly listed or owned by investment funds.
Glas Cymru, the parent company of Dŵr Cymru, has about 50 appointed members without a financial interest in the business.
As a private company limited by guarantee, it reinvests all surpluses rather than paying dividends to shareholders.
Its funding has included the sale of bonds carrying a fixed interest rate.
The briefing says claims that Dŵr Cymru provides a more beneficial Welsh approach for customers and the environment require examination.
It notes that the company’s website presents it as a not-for-profit whose low-cost corporate bonds allow benefits to be passed to customers through lower bills and improved services.
According to the report, these claims have often gone unchallenged by Welsh politicians, civil society organisations and the media, with Dŵr Cymru long portrayed as part of Team Wales.
The researchers say environmental problems identified by water regulators, recorded by a Senedd Committee and publicised by civil society activists undermine those claims.
They also point to an intervention by Dŵr Cymru chief executive Roch Cheroux during a September 2026 Financial Times interview.
The report says Cheroux acknowledged problems with Dŵr Cymru’s infrastructure comparable to those affecting other water companies despite its not-for-profit status.
He also attributed the difficulties to the regulatory model rather than ownership, while Water UK had adopted a similar position.
Accounting analysis in the briefing disputes the importance of ownership and regulation, instead identifying financial unsustainability within the wider business model.
The report says this provides evidence for the first time that bond finance does not produce low-cost funding for a not-for-profit water company.
It also rejects the idea of a single solution to the sector’s interconnected problems, stating that neither public ownership nor stronger environmental regulation will substantially reduce sewage spills without changes to charging arrangements.
Such changes would require higher-income households to contribute a fairer share while easing the pressure of higher water bills on lower-income households.
Revenue from the water industry in Wales and England is insufficient, according to the report, to cover daily operations, infrastructure renewal and the costs of financing through bonds or equity.
The finding applies both to Thames Water, which operates for profit, and Dŵr Cymru/Welsh Water, which has no shareholders receiving dividends.
The existing household charging system would leave even publicly owned water companies without enough income to maintain drinking-water supplies, prevent sewage discharges into rivers or prepare for climate change.
The report calls for higher revenue and stronger public oversight to enable effective scrutiny of the industry.
It states that Dŵr Cymru’s financing costs have amounted to 27p for every pound of revenue since 2001, despite the absence of shareholders.
Thames Water spends a slightly higher 30p per pound on financing.
Bond finance offered limited savings at Dŵr Cymru because its bonds were linked to inflation and connected to a derivatives portfolio.
Although a publicly owned company could borrow at lower rates, the report says the difference would be insufficient to overcome the underlying business-model problems at 2026 interest rates.
Bond financing secured sustainability only while money was cheap, including during the 2010s, when general interest rates were low.
The charging system is described as regressive because it places a disproportionate burden on lower-income households.
Restrictions on water-bill increases during the 2000s and 2010s limited the revenue available to the sector, and higher-income households continued not to pay a fair share when increases became unavoidable in the 2020s.
Household charging has not generated enough income to meet the substantial investment demands of a capital-intensive industry.
During the 2010s, sewage-treatment upgrades and reservoir construction did not keep pace with demand, and spending on patch-and-mend investment reached 40p for every pound of revenue.
The report identifies income-linked, progressive charging as the long-term objective, with the potential to double revenue while leaving most households paying no more.
For immediate affordability measures, it recommends that the Westminster Government introduce a more generous national social tariff for every household receiving Universal Credit, with most of the cost met through charges on households paying full bills.
The report says the Welsh Government has a distinct opportunity to begin moving towards greater social control of the water sector after Dŵr Cymru’s failure to deliver.
The Welsh Government is formally responsible for creating Welsh-specific regulation through a Welsh Ofwat, but the researchers argue that it could also take initial steps towards broader social governance.
Their proposals include a bill of works establishing the costs of different policy options as a preliminary step towards a Citizens Assembly, supported by expert advice and charged with setting priorities.
They also recommend establishing a Water Observatory with activist representation and creating a new, adequately resourced Senedd Standing Committee to examine financial and environmental performance.